The decision of Finance Minister P. Chidambaram to bring down excise duty on capital goods from 12 per cent to 10 per cent in the interim budget will provide a short-term breather for the sector, and is expected to give a fillip to this sector which has been hit hard by slowdown, according to experts.
“Achieving targeted revenue growth in a sluggish economy will be a challenge in 2014-15. Excise duty reduction for capital goods while being a positive, has a limited shelf life till, perhaps June, 2014,” R. Shankar Raman, CFO, L&T, told The Hindu.
“Measures to boost the health of the manufacturing sector, in general, and capital goods, in particular, will require sustained initiatives over the next several years. Thrust to skill development, infrastructure and likely increase in capex spends of public sector undertakings will aid recovery of capital goods industry,” Mr. Shankar Raman added.
Commenting on the cut in excise duty, Shailesh Haribhakti, Chairman of consultancy firm DH Consultants, said: “It will boost capital goods sector so that it is ready when the investment climate picks up.”
The Automotive Components Manufacturers Association of India (ACMA) said that the move would uplift consumer sentiments. “The reduction in excise duty on capital goods will stimulate the industry for higher investments in manufacturing,” said Harish Laxman, President of ACMA.